Investing in real estate for your child’s future is a unique option as it provides a tangible investment that your child can physically touch and experience. In essence, it brings the business world to life and allows them to participate in building their future, unlike any other investment experience. Involving your child in the journey of purchasing an investment condominium and caring for the property first hand, will provide valuable lessons regarding asset growth and asset management.
Real estate is a powerful tool to add to your investment toolbox. Adding real estate is
a unique option as it will most certainly appreciate, and as such, your investment offers the gift of choice. Choice provides freedom for your child to utilize the asset in a way that will benefit them no matter what their future holds. This creates a level of secure financial planning that differentiates real estate from every other available option. Dan Wynnyk, Vice President of The Waterfront Group comments, “Diversification is the cornerstone of responsible investing, in short, it means – never put all your eggs in one basket. This is just sound risk management. Diversification should include not only different individual investments but different asset classes too, including real estate. Diversification not only reduces the risk of an extreme loss in a portfolio, it has been proven that investing in multiple asset classes actually improves investment returns.”
Share in the teachable moments that an investment condominium provides. Embrace the opportunity to teach your child how various aspects of running a rental business work together to build a successful environment, and demonstrate how taking care of your asset contributes to its growth in value. Involving your child in the entire process will give them a hands-on look at how the tenant/landlord relationships function, and they can also participate in deciding where
the rental income will be redistributed or reinvested.
Your journey with your children is a marathon of twists and turns that exposes you to all
the joys and challenges that parenting brings. The purchase of a condominium, for investment purposes, is also a marathon investment if you want to maximize your return. It is recommended to hold real estate for a minimum of ten to twenty years to be able to experience a sizeable return on investment, keeping in mind this number may vary based on market conditions and area. With the rising value of real estate, a minimum ten- to twenty-year span will generally allow for significant growth, and, the best part is, you can watch the growth happen year-over-year as the market increases with demand.
The GTA condominium market has been a hot topic over the past year. Rental demand has been reported by TREB to be increasing steadily over the past several months. Condominium developments are being planned and built in every sought after neighbourhood in the GTA within close proximity to an abundance of fine dining establishments, as well as the latest in fitness and entertainment options. This lifestyle is appealing to the rental population as it offers a turn-key solution for frequent travellers and low property maintenance – perfect for the urban jet-setter. With the vast array of services and amenities being included in up-scale buildings, the convenient and posh lifestyle is being seen as a way to enjoy private space while being included in a like-minded community.
Although this investment has some additional pieces to care for, such as maintenance fees and insurance, once set up, the process will be easy to maintain. Samantha Hamilton, Sales Representative at Dan Lawrie Insurance Brokers remarks, ”Condo insurance is one of the most misinterpreted types in the industry and renting out a condo will impact the coverage options as well. As the unit owner, there are some key features to look for including “loss assessment”, “improvements and betterments” and, of course, lost income. Ensuring coverage is in place for these areas will protect you against any shortfall between the building and occupant’s insurance. Always be sure to review coverage with your broker to understand what you have in place to best protect your investment.”
In the GTA, average rents grew 9.1 percent year-over-year in Q4 2017. In Q1 2018,
the average rent for a one bedroom is $2166 (urbanation.ca). The income generated can be reinvested into another aspect of your portfolio or used for cash flow to fund activities that your child is involved in. The average tenant stays for a twenty-four month period, which will demonstrate that running a business is fluid and requires nurturing to be able to grow and flourish.
Creating a diverse portfolio of assets allows you to have a variety of resources working for you and aids in balancing your risk. Investing in a rental condominium is an investment in yourself and your family, as you are opening a doorway to possibility. Sharing this experience with your child provides a living environment to see the benefits and challenges that come with managing and growing an asset for future gain. Involving your child in the process, knowing they will have freedom of choice to live in the property, sell to use the profits for a down payment on their first home or use the positive cash flow to fund activities in their life will give them an experience that is truly unique and certainly exceptional when it comes to learning the responsibilities of money management. Working together to nurture this investment will impart valuable lessons to last a lifetime.